Peer-to Peer Payments Gain Momentum

Small business owners and their customers no longer have to rely on checks to make and accept payments thanks to new peer-to-peer payment services cropping up.

Peer-to-peer payment services, which are being offered from a slew of banks, lets business owners transfer money to a customers’ accounts or vice versa using just an e-mail address or mobile phone number.

Users can conduct the transaction from their existing bank account, which means they won’t have to visit a different Web site to access the service.

“Billions of dollars are transferred back and forth from one business to another via check,” said Steve Shaw, Internet banking and electronic payments group director at Brookfield, Wisc.-based Fiserv (FISV), which later this month will launch ZashPay, its P2P transfer service.

Shaw said more consumers and businesses are looking for ways to make payments sans the check as their comfort level with conducting financial transactions online grows. “Either the check is put in the mail or handed to someone. It takes time and effort [to cash the check].”

According to Javelin Research, nearly 44% or 38 million of the 86 million online households made at least one online P2P fund transfer in 2009, up from 27% in 2008. Javelin is forecasting 60 million American households will use P2P transfers by 2014. The oldest and most popular form of P2P payments comes via PayPal. With the new services, however, the customer will be able to make the payment through an existing bank account.

Fiserv’s product, dubbed ZashPay, will launch in late June with 100 banks committed to offering the service with more being added each week.

If a bank is offering the service, the business owner would login to the bank account, input an email address and send a message to the recipient and transfer the money. The service lets you make transfers online or via a browser-enabled mobile phone.

The recipient would then login to claim the money, which would automatically be deposited into the account as soon as the next day.

If the banks for the payee and the person receiving the money don’t offer the service, Fiserv is launching a public web site at www.zashpay.com where after signing up, people can transfer money back and forth. The banks determine the fee the sender of the money has to pay with a suggested fee of 50 cents. ZashPay.com will charge $0.75 for each payment initiated at the site.

The service is just as secure as the existing bill pay service offered by Fiserv thanks to fraud tools built in to ensure the payment is coming from a valid e-mail address and going to a verified location. If a red flag arises, the payment won’t be sent.

For small business owners and their customers P2P lending may be attractive because they will no longer have to write a check, buy a stamp, mail it and then wait for the check to clear. Shaw noted small businesses can use it as a way to manage and reconcile invoices.

“It helps from a convenience and speed perspective because they can reconcile more accounts,” said Shaw.

Fiserv with ZashPay isn’t the only financial company launching P2P payment services. CashEdge of New York has its Popmoney P2P payment service and in May announced Bank of the West is using the service.

Like ZashPay, Popmoney lets bank customers send money from their bank account using a recipients email address, mobile phone number or bank account information. Intuit has its PaymentNetwork service that charges small businesses 50 cents per payment received. Like the other services with PaymentNetwork the small business would receive payments from anyone with an email address with the funds directly transferred into the small businesses bank account. Among the banks offering P2P payment services are PNC (PNC) and Wells Fargo (WFC), to name a couple.